Who participates in R&D subsidy programs?: The case of Spanish manufacturing firms

Empirical evidence on the effectiveness of R&D subsidies to firms has produced mixed results so far. One possible explanation is that firms and project selection rules may be quite heterogeneous both across agencies and across industries, leading to different outcomes in terms of the induced additional private effort. Here we focus on the participation stage. Using a sample of Spanish firms, we test for differences across agencies and industries. Our results suggest that firms in the same industry face different hurdles to participate in different agencies’ programs, that participation patterns may reflect a combination of agency goals, and that patterns differ across high-tech and low-tech industries.     

Implementing R&D policies: an analysis of Spain's pharmaceutical research program

We analyze Spain's National Pharmaceutical Research Program using detailed firm-level data. We find differences between ex ante announced evaluation criteria and ex post implementation. This suggests that judging R&D programs on their design, rather than their implementation, may be misleading. We also uncover that the apparent discrimination against non-European firms can be interpreted as a premium to having local production facilities. Overall, the program values firms on the basis of criteria, such as R&D investment and patent spending, consistent with empirically tested measures of innovative activity.     

The ex ante assessment of knowledge spillovers: Government R&D policy, economic incentives and private firm behavior

This paper investigates the role of government R&D subsidy programs in stimulating knowledge spillovers. R&D subsidies are an effective public policy instrument when knowledge spillovers exist yet ex ante it is difficult to identify projects that have the greatest potential to increase innovation and economic growth. This paper derives a set of project and firm attributes that the literature finds generate knowledge spillovers and uses data on project proposals to estimate the degree to which a government R&D program conforms. We find that projects that were awarded R&D subsidies were more likely to have attributes such as participation in new research joint ventures and connections to universities and other firms. Following the post-award activities of firm, we find that receipt of a government R&D subsidy increased the funding from other sources when compared to firms that were not awarded funding.     

Innovation regimes, R&D and radical innovations in telecommunications

By introducing the concept of innovation regimes, the aim of this article is to show how the rapid pace of technological development in the telecom sector may be explained by the close links between the sector's own R&D and the creation of numerous innovations, many of which are radical. In contemporary innovation theory, a theoretical antinomy exists: Whereas, the creation of incremental innovations is variously explained in terms of «rational» responses to markets, dynamics of technological regimes, dominant design, etc., radical innovations, in contrast, are explained in terms of serendipity, chance or haphazard scientific discoveries. Evidence from analysis of innovations in the telecom sector suggests that innovation regimes have provided a capability of coordination, direction and leadership in the creation of many of the radical technological innovations that have emerged in the sector. Thus, one may claim that the strong innovation regimes and high R&D intensity of the telecom sector, at least until recently, have provided a capability of creating innovations on purpose — for a purpose. The policy implications of this contradict some of the assumptions on which the prevailing market-oriented R&D governance models and policies are based — and which are supported by contemporary innovation theories.     

Effects of foreign acquisitions on R&D activity: Evidence from firm-level data for France

This paper investigates the causal effect of foreign acquisitions on the research and development (R&D) activities of domestic target firms over the period 1994–2004. Using accounting data on French innovative manufacturing firms, we implement appropriate difference-in-difference estimation techniques associated with a matching propensity score procedure. We find that the acquisitions of French firms by foreign companies boost R&D spending. There is a simultaneous rise in the external and in-house R&D expenditures of French acquired firms. R&D is more contracted out to local research providers, in particular to local public laboratories and universities. The increase in internal R&D spending benefits to development, but also basic and applied research. Finally, the growth of the R&D budget is not only financed by internal resources but also receives financing from external partners, especially parent companies. Thus, our results call into question the idea that foreign takeovers hamper the R&D development of target firms and are detrimental to the national innovation system of the host country. First, acquisitions appear to bring efficiency gains enough to counterbalance the various costs of integration and market power effects, pushing firms to invest more in R&D. Acquisitions do not seem to incite managers to take shorter term and more financial driven decisions at the expense of R&D. Second, when motivated by technology sourcing and overseas R&D development, acquisitions might be used to access the specific know-how of target firms and to tap into the knowledge of the national innovation system. Then, purchaser firms could be more likely to develop the innovative capability of target firms and to strengthen their linkages with local partners than to reduce them and relocate R&D abroad.     

Cooperative R&D and firm performance

We analyse the impact of R&D cooperation on firm performance differentiating between four types of R&D partners (competitors, suppliers, customers, and universities and research institutes), and considering two performance measures: labour productivity and productivity in innovative (new to the market) sales. Using data on a large sample of Dutch innovating firms in two waves of the Community Innovation Survey (1996, 1998), we examine the impact of R&D cooperation in 1996 on subsequent productivity growth in 1996–1998. The results confirm a major heterogeneity in the rationales and goals of R&D cooperation. Competitor and supplier cooperation focus on incremental innovations, improving the productivity performance of firms. University cooperation and again competitor cooperation are instrumental in creating innovations generating sales of products that are novel to the market, improving the growth performance of firms. Furthermore, customers and universities are important sources of knowledge for firms pursuing radical innovations, which facilitate growth in innovative sales in the absence of formal R&D cooperation.     

R&D spillovers, patents and the incentives to innovate in Japan and the United States

National surveys of R&D labs across the manufacturing sectors in the US and Japan show that intraindustry R&D knowledge flows and spillovers are greater in Japan than in the US and the appropriability of rents due to innovation less. Patents in particular are observed to play a more central role in diffusing information across rivals in Japan, and appear to be a key reason for greater intraindustry R&D spillovers there, suggesting that patent policy can importantly affect information flows. Uses of patents differ between the two nations, with strategic uses of patents, particularly for negotiations, being more common in Japan.     

Managing R&D in technology-followers

The R&D effort, even of the largest, most technologically advanced developing countries, and their most sophisticated firms, cannot match that of the major industrial nations or the largest corporations. Our objective in this paper is to analyse innovation, technical change and R&D management in technology-leaders to build a framework for R&D in technology-followers outside of those major nations. This framework emphasises the importance of specific learning mechanisms and puts forward an argument that in-house R&D is indeed required in technology-followers, but a profoundly different type of R&D. R&D units, based in the firm, can become the location for organised learning, the problem-solver of last resort in production, the in-house knowledge store and gatekeeper, and the focus for independent design and product development capacity.     

Spillovers from publicly financed business R&D: some empirical evidence from Germany

This paper investigates the effects of interindustry R&D spillovers from publicly financed business R&D on private R&D efforts and productivity using data of West German manufacturing industries. The results suggest that it is important to distinguish between the effects of spillovers from privately and publicly financed business R&D. In particular, estimation results provide evidence of productivity-enhancing effects of spillovers from privately financed R&D while results are less clear-cut for publicly financed R&D. Moreover, there is some empirical evidence that private R&D efforts of higher-technology industries are stimulated by spillovers from privately financed R&D but not by spillovers from publicly financed R&D. However, public funding of R&D in higher-technology industries seems to induce private R&D investments within these industries.     

Innovative R&D and optimal investment under uncertainty in high-tech industries: An implication for emerging economies

In order to continue on the path to convergence with advanced countries, emerging countries need to strengthen their research capabilities. Often they try to do this through the development of strategic industries. The objective of this paper is to contribute to the debate on the effectiveness of policies aimed at the development of strategic industries in emerging economies. The paper develops a three-phase model for product innovation with capital investment under uncertainty to study the investment decisions of a manufacturer in an industry facing a volatile market demand for new inventions. The findings demonstrate the importance of interactions between market structure, a firm's market power and the associated cost of adjustment. The paper draws out implications for emerging economies with regard to policies striving to develop strategic industries in sectors such as semiconductors and information technology.     

Deregulation, technology imports and in-house R&D efforts: an analysis of the Indian experience

This paper analyses the effects of the deregulation policy introduced in India in the mid-1980s on the relationship between technology imports and in-house R&D efforts. Using appropriate statistical techniques, it examines the interactions between policy regime, economic environment and the determinants of inter-industry variation in technology imports in Indian manufacturing. In doing so, it introduces R&D efforts as one of the main determinants. Literature suggests that there is simultaneity in the relationship between technology imports and R&D efforts. To tackle this problem, lagged R&D expenditure intensity is adopted as a proxy for in-house R&D efforts. The empirical results reveal that technology imports were only weakly related with the past in-house R&D efforts in the protective regime. Deregulation promoted complementarity between technology imports and R&D efforts significantly. The results also suggest that after deregulation, the impact of product differentiation, demand conditions and technology-related factors increased significantly in determining the inter-industry patterns of technology imports. Thus, unlike in a regulated regime where technology imports are viewed important for filling gaps in domestic technological capabilities, in a deregulated regime technology upgradation seems to be the major role of technology imports.     

R&D, higher education and regional growth: Uneven linkages among European regions

This paper examines the relationship between the economic growth of European regions and their knowledge and human capital endowments. The share of adult population with tertiary education and the intensity of R&D expenditures in value-added emerge as the most effective factors enhancing the growth of GDP per capita recorded, during 1995–2002, by the regions belonging to twelve countries of the former EU15. However, while the educational variable is effective for the whole regional set, the impact of R&D is significant only for the regions that are above a given threshold of per capita GDP. Moreover, remarkable disparities arise among the regions of different countries. In particular, only within North European countries there is a significant relationship between regional growth and the intensity of R&D and higher education. The policy implications of both findings are discussed.     

Incongruities as a source of organizational renewal in corporate management of R&D

The heydays of the central R&D laboratory as the ‘dominant design’ of corporate R&D in large technology-intensive companies is over. The last decades have witnessed not only downsizing of central R&D, but also ongoing experimentation and restructuring of the modes of managing corporate R&D. What is the logic behind these ongoing restructurings? The paper argues that different kinds of organizational incongruities constitute critical sources of change in the organization of R&D. The paper seeks to align a contingency and an evolutionary perspective in analyzing two Danish technology-intensive companies characterized by highly different organizational trajectories.     

Competing explanations for knowledge exchange: Technology sharing within the globally dispersed R&D of the multinational enterprise

This paper explores five competing theories for technological knowledge sharing within the globally dispersed R&D function of the multidivisional, multinational firm. These five broad explanations for why a knowledge transaction occurs are: (1) economic, (2) technological, (3) organizational, (4) geographic, and (5) sociological. In addition to occurrence, likelihood of knowledge exchange success prompted by various explanations is considered. Ultimately the determination of which argument—or combination of arguments—offers the greatest explanatory power for the sharing of intermediate technological knowledge may be answered empirically.     

R&D intensity, value appropriation and integration patterns within organizational boundaries

Complementary insights from Transaction Cost Economics (TCE) and the Resource-Based View (RBV) of the firm are combined to predict the relationship between firm specific technological knowledge and patterns of integration within organizational boundaries. The findings show that the level of Research and Development (R&D) intensity (representing the creation of firm specific technological knowledge) has an inverted U-shaped relationship with the propensity of firms to integrate activities within organizational boundaries. At low levels of R&D intensity, firms’ propensity to integrate their activities is low, but increases with escalating levels of R&D intensity in order to avoid the misappropriation of value generated by technological knowledge. However, beyond a certain R&D intensity level, the propensity to integrate activities declines, since the level of technological knowledge is high enough to prevent imitation by third parties. As expected we further find that firms which follow this integration pattern outperform those which do not. As the level of R&D intensity increases, the integration of production and marketing activities enables firms to improve performance until a certain R&D intensity threshold, after which such integration negatively affects performance.     

The interaction of R&D intensity and firm age: Empirical evidence from technology-based growth companies in the German “Neuer Markt”

This study examines the technology strategies of 88 technology-based growth companies that went public on the German “Neuer Markt” between 1997 and 2002. The regression analyses show significant positive effects of R&D on growth but negative effects on profitability. The data suggests that firm age is a moderating factor influencing whether technology investments lead to higher growth or profitability in the life cycle of technology-based growth companies. In our sample, higher R&D intensity led to increased sales growth but lower return on sales, but the growth effect was negative and the impact on profitability positive. These results support the significance of company life cycle theories for formulating technology strategies, which suggests that different stages in the development of technology-based firms call for specific levels of R&D intensity to sustain growth and profitability.     

Heart of darkness: modeling public–private funding interactions inside the R&D black box

This paper is a first step toward closing the analytical gap in the extensive literature on the results of interactions between public and private R&D expenditures, and their joint effects on the economy. A survey focusing on econometric studies in this area reveals a plethora of sometimes confusing and frequently contradictory estimates of the response of company-financed R&D to changes in the level and nature of this category of public expenditures. Yet, a theoretical framework seldom is provided within which the empirical results are to be interpreted. Some such structure is necessary, in view of the multiple channels through which public research can affect private R&D performance, especially as not all the effects flow in the same direction. A major cause of “inconsistencies” in the empirical literature is the failure to recognize key differences among the various policy “experiments” being considered — depending upon the economy in which they are embedded, and the type of public sector R&D spending that is contemplated. Using a simple, stylized structural model, we identify the main channels of impact of public R&D. We thus can characterize the various effects, distinguishing between short- and long-run impacts that would show up in simple regression analyses of nominal public and private R&D expenditure variables. Within the context of our simple model it is possible to offer interpretations that shed light on recent cross-section and panel data findings at both high (i.e., national) and low (specific technology area) levels of aggregation.     

Determinants of successful R&D cooperation in Japanese small businesses: The impact of organizational and contractual characteristics

Using original survey data on Japanese small businesses, this paper analyses the impact of the organizational and contractual characteristics of cooperative R&D, such as membership structure, partner relationship, external support, and rules of cost and outcome sharing, on the probability of the technological and commercial success of the project. Empirical results suggest that cooperative R&D is more successful, the higher the quality and quantity of external resources available through cooperation, and the lower the transaction and coordination costs required for such arrangements. Moreover, we found that the determinants of technological and commercial success differ considerably.     

Dynamics of R&D networked relationships and mergers and acquisitions in the smart card field

This paper analyzes how the structure and the evolution of inter-firm agreements have shaped the development of the smart card industry. The aim is to establish a closer connection between the evolution of inter-firm agreements in the smart card industry and the patterns of change of technology and demand in this new high-tech industry. Based on a proprietary database covering both collaborative agreements and mergers and acquisitions (M&As) occurring in this industry over the period 1992–2006, we find that the evolution of technology and market demand shapes the dynamics of R&D networks and M&As are likely to change the industry structure. We also find that a small group of producers – first-movers – still control the industry and technological trajectories. Their position arises not for oligopolistic reasons of market structure, but for technological and organizational reasons.     

The dynamics of R&D network in the IT industry

In this paper, we provide an empirical analysis of evolving networks of successful R&D collaborations in the IT industry (consisting of firms that obtained patents in the technological category of computers and communication) in the U.S. between 1985 and 1995. We first show that the R&D network has become more extensive, more clustered, and more unequal in the sense that ‘stars’ have emerged in the network. We then analyze the effect of the existing network structure in the process of new R&D collaboration formation. We control for unobserved similarities among firms based on the community structures within the network that the algorithm developed by Girvan and Newman (2004) identifies and find a significant cyclic closure and preferential-attachment effect.